Ohioans Face Tough Test to Receive Unemployment Benefits

January 25, 2013

Ohioans Face Tough Test to Receive Unemployment Benefits

January 25, 2013

As policymakers consider how to respond to this issue, they should bear in mind that Ohio’s earnings requirement excludes many workers. The fairest standard links eligibility to hours worked rather than to a minimum dollar amount.

Unemployed workers in Ohio must have earned more than their counterparts in almost any other state in order to qualify for unemployment compensation. Ohio is the only other state besides Michigan where the following workers, employed all year long, would not qualify for benefits:

A minimum-wage worker employed 29 hours a week; and

An $11-an-hour worker employed 20 hours a week.

Those are the key findings of an analysis by Policy Matters Ohio on how Ohio’s monetary eligibility standard compares with that of all other states and the District of Columbia.

Every state sets its own standard for how much one must earn in order to qualify for unemployment compensation (UC). This year, Ohio requires workers to earn on average at least $230 a week for at least 20 weeks of work to qualify for benefits. Most states require claimants to earn a minimum amount in a calendar quarter. In addition, they set a minimum for the amount earned in a year.

Ohio requires annual earnings of at least $4,600 in the base year used to determine eligibility. As Figure 1 shows, only North Carolina and Washington require higher minimum earnings during the base year of employment. Yet in Ohio, year-round workers can make close to $12,000 a year and not be eligible if they average less than $230 each week. Employers pay taxes on only the first $9,000 of wages in Ohio whether or not their workers make enough to qualify.

Nationally, just 27 percent of unemployed workers received regular state unemployment compensation in the year ended Sept. 30. However, Ohio has persistently covered a smaller share of its unemployed workers through its UC system than most other states. In the year ended Sept. 30, just 23 percent of unemployed Ohioans received state UC benefits, ranking Ohio 35th in the country.[1]

This month, Congress approved the continuation for another year of federal support for UC benefits, allowing workers to continue receiving payments for more than the 26 weeks of regular benefits that Ohio and most states allow. This permitted about 50,000 Ohioans – and two million claimants across the country – to continue receiving these benefits, which are sorely needed in a time of continuing high long-term unemployment. Altogether, including those unemployed workers who receive federally supported benefits, 51 percent of the jobless receive benefits nationally and 43 percent of unemployed Ohioans do. However, this still leaves Ohio lagging –and the U.S. program is not a permanent one.

Ohio’s tough earnings test is just one reason why a smaller share of unemployed workers in the state receives UC benefits than in other states. For instance, Ohio does not allow unemployed workers who are seeking part-time work to receive benefits, as is permitted in most other states.

Some states, such as Arkansas and Pennsylvania, have increased earnings requirements in recent years.[2] In a few other states, such as Vermont, 20-hour-a-week minimum-wage workers barely qualify for benefits. However, Ohio remains an outlier with its stricter earnings standard. The state sets its requirement each year based on 27.5 percent of the state average weekly wage.

Ohio 5th highest by another measure

UC expert Wayne Vroman of the Urban Institute pointed out in a 2008 report for the Ohio Department of Job & Family Services that Ohio had an unusually high earnings requirement. Vroman calculated that between 1992 and 2007, the average weekly wage as a share of the base-period earnings required to qualify in Ohio was one of the highest in the country.[3] That remains the case: Ohio’s annual earnings requirement compared to the average weekly wage ranks 5th highest among states in the country, based on the most recent earnings data.[4]

Ohio currently owes $1.77 billion to the federal government,[5] which was borrowed to pay UC benefits after years in which the state underfunded the system.[6] As policymakers consider how to respond to this issue, they should bear in mind that Ohio excludes more workers from receiving benefits than most other states, and that further ratcheting up this standard would both penalize low-wage, part-time workers and push Ohio even more outside the mainstream.

Ohio should look instead to reduce the monetary requirement. Every state except Michigan and Ohio permits a worker employed 20 hours a week all year long at the minimum wage to qualify for benefits. The cost of reducing the threshold to this standard is likely to be modest. The fairest standard is one that links eligibility to hours worked, instead of to a minimum dollar amount, which discriminates against low-wage workers. Three states – New Jersey, Oregon and Washington – use hours of work as one basis for establishing monetary eligibility.

Methodology for the study

Data in the study began with UC eligibility requirements as of January 1, 2012, as compiled by the U.S. Department of Labor[7] and UWC - Strategic Services on Unemployment & Workers' Compensation (UWC), a national business organization that represents employers to policymakers on UC. In those states where requirements change yearly or the DOL and UWC did not agree, 2013 information was obtained from state agencies. Current information was also obtained in those instances where the DOL reported a change in state eligibility requirements in 2012.[8] State minimum wage information comes from the DOL and covers minimum-wage laws as of Jan. 1, 2013.[9] In those states where requirements increase during the course of the calendar year, the current amounts have been calculated.

The analysis in this brief reviews only the eligibility of year-round workers. States each have their own requirements for how much of the year a claimant must work to qualify. Quirks in each state’s law may affect whether particular claimants qualify. In Ohio, for instance, a claimant who makes enough during 20 weeks of work to qualify could find if they work additional weeks, but for fewer hours each week, they no longer average $230 per week and thus fail to meet the earnings test.

Interns Casey Andersen and Timothy O’Toole did significant research for this brief.

[4] Outranking Ohio were Washington, South Carolina, Maine and North Carolina. For wage information, see U.S. Bureau of Labor Statistics, Midwest Information Office, “County Employment and Wages in Ohio – First Quarter 2012,” Table 3, available at http://bls.gov/ro5/qcewoh.htm#table3html.f.1.